Greece’s scariest deficit has nothing to do with money

Published: May 7, 2015 2:00 a.m. ET

Market Watch

By ELLIE ISMAILIDOU

MARKETS REPORTER

Ancient Greece was once a magnet for the world’s intellectual elite. Scholarly work out of Athens contributed to everything from logic and philosophy to the politics that formed the basis of modern civilization.

But as the Hellenic Republic struggles to strike an agreement to repay more than €300 billion it owes international creditors, it’s also facing the depletion of its most important asset: human capital.

A devastating brain drain is luring away the best and brightest of Greece’s workforce, several reports showed, with estimates varying between 180,000 and 200,000 well-educated citizens leaving the cash-strapped nation.

At that rate, the exodus translates to about 10% of the country’s total university-educated workforce, said Lois Lambrinidis, a professor of economic geography at the University of Macedonia.

On a macro level, this movement is a clear brain drain, said Nicholas Alexiou, a sociology professor at CUNY’s Queens College who studies Greek immigration patterns.

What differentiates a brain drain from other types of migrant waves is the high percentage of skilled and educated people who leave the country, Alexiou said.

In other words, Greece is losing its “youngest, best and brightest,” as a European University Institute study dated March 2014 noted.

According to the study, of those who have left 88% hold a university degree, and of those, over 60% have a master's degree, while 11% hold a Ph.D.

According to the EUI report, 79% of those who left Greece during the crisis were actually employed but felt that there was “no future” in the country (50%) or no professional opportunities (25%).

The brain drain has serious implications for the Greek economy, at a time when the country has lost 25% of its gross domestic product since the crisis began — equally to the GDP lost by Western Europe and the U.S. during World War II.

It has fiscal implications, affecting income and consumption taxes, among others. But the brain drain also deprives the country of the capacity to generate higher-value production, said Joan Vidra, a former Moody’s analyst who now heads the sovereign-ratings department at ARC Ratings.

Even in tourism, despite the increase in the number of international visitors, total income decreased by 36%, according to a study by Endeavor, an international nonprofit supporting entrepreneurship.

Things could get even worse, as around 35,000 young Greeks are currently studying abroad and could decide to seek employment outside the country, the report noted.

Not to mention the number of Greeks living in the country who are in the process of relocating. In January 2014, Greek newspaper “To Vima” published a study by Greek market research firm Kapa Research, which showed that 70% of Greek recent graduates wish to work abroad and 10% are already actively looking for a job in a different country.

So, where do these highly educated Greeks go?

Overall, the most popular destination is the U.K., followed by Germany and the Netherlands, according to the EUI study.

Endeavor’s study says that for those up to 35-years-old (and for moves strictly related to employment — excluding studies, family or other reasons to migrate), the most popular destination is Germany.

Germany and U.K. are the most popular destinations accounting for more than 50% of the work-related immigration below the age of 35, said an Endeavor spokesperson.

By profession, the U.K. has been luring a high number of financial whizzes from Greece, tech talent is heading to the U.S., engineers have been moving to the Middle East, while medical professionals have been immigrating to Germany, according to the report.

In March 2015, Greek newspaper Ta Nea reported that 3,500 Greek doctors moved to Germany since the beginning of the crisis. That is about half of the total 7,340 doctors who have left Greece since the crisis began, according to Greek newspaper “Proto Thema.”

The number of doctors leaving Greece has more than tripled since 2009, before the crisis started, according to the Athens Medical Association. This makes Greece the biggest doctor exporter to Germany in the world, as a study by Greek newspaper Eleftherotypia showed.

Germany, the largest economy in the eurozone, has been among the most critical of Greece’s fiscal policy.

“The irony does not escape us,” said Natassa Rwmanou, a research professor at Columbia University and a U.S. representative of Syriza, the Greek prime minister’s ruling party.

“While Germany holds back on the Greek bailout negotiation, it is in certain ways reaping the benefits of the human capital that is fleeing the country,” Rwmanou argued.

As Greece’s unemployment rate reached 25.7% in January 2015 — more than double the 9.7% average for the European Union — the number of educated young Greeks who have left the country since the beginning of the crisis rose to 180,000, according to Lambrianidis, who is set to release his findings next month as part of two research projects financed by the London School of Economics and the European Union.

Overall, Endeavor estimates 200,000 Greeks below the age of 35 have left the country since the beginning of Greece’s crisis in 2010.

That figure is likely higher now, given that Endeavor’s data only run through 2013.

The exodus of Greece’s best and brightest highlights the challenges the country faces not just in paying its debts, but also maintaining a healthy economy — whether it stays in the eurozone, or leaves.